tv Global Economic Outlook Panel at World Economic Forum CSPAN January 30, 2018 7:37am-8:43am EST
hearing, live coverage at 10:00 eastern on c-span3, you can watch live on c-span.org and the free c-span radio apps. >> the president of the united states. >> tonight, donald trump gives his first state of the union address to congress and the nation. join us for a preview starting at 8:00 eastern. then the state of the union speech live at 9:00 pm. following this speech the democratic response from congressman joe kennedy. we would hear your reaction and comments from members of congress. the state of the union address on c-span, listen live on the free c-span radio apps available live on your desktop, phone or tablet at c-span.org. >> leslie government officials and economists across the globe, the world economic forum in the final session
international monetary fund managing director christine lagarde was joined by central bank governors and financial analysts to talk about the global economic outlook, this runs about an hour. >> i am so delighted again to be moderating the global economic outlook. and unusual warm-up act. i am disappointed for some reason they forgot to provide the bands. and the growth is very important. and trade needs to be free,
growth, jobs and the nature of the trading system are important for our discussions now. we are meeting at a point in which for the first time since january 2008 the web has a tendency to be behind the times so it didn't fully recognize at that time how bad it was going to be but since ten years, since extraordinarily global economic optimism, a widely shared synchronized recovery. the risks in both directions, and the longer term opportunities and challenges it creates and to do so if i may
introduce the panel, everybody here, i have christine lagarde to my left, she has been a member of this panel for quite a long time, to her left, she is the managing director of the international monetary fund, to her left, mark carney who is to be the governor, and the bank of england and central banks of so many governors after all. to his left is carrie lam, chief executive of hong kong and to her left, the governor of the bank of japan, a friend of mine for 40 years. and the officer of jpmorgan,
and quite a few occasions. to this one. let's start with the short-term economic outlook and you have recently -- your update which is wonderfully cheerful in every respect forecasting 3.9% growth this year and next. what could go wrong? >> let's celebrate what could go right for a moment. we are in a -- what is more interesting, seeing growth
increased last year. and emerging markets economies, part of the world i worry most about this where we have a combination of factors that leads to the lower income per capita. and negative downside risks and policies that have been implemented by policymaker's, and the cyclical -- what was implemented. he had no idea about ten years ago. fiscal policies that have been reasonably good. it is debatable eight years ago, in the main it is a result of good policies. what could go wrong i mention
vulnerabilities as i see them. financial vulnerabilities and the tax reform certainly would have positive effects in the short-term and the us and countries around, and lead to serious risks and we can discuss that if we want and the financials in their abilities given the high asset prices around the world and easy financing that is available. the second risk that was short or medium term addressed in the short-term and excessive any quality than in many places are growing. and identified as the themes of the world economic forum this year and the third, the risks that i see, the lack of international corporations and geopolitical risks that can be
created as a result, happy to comment on any of those three. >> these are huge points and come back to them and let's turn to one of the central bankers produced at these outcomes. and controversial. they have been described by a well-known authority as the only game in town and many of us feel that is true or of japan n anywhere else so there were three arrows and yours are the arrow that has gone further. tell us about your remarkable monetary policy, its success and how you are going to get out of it. >> let me first explain the status of the japanese economy.
the economy is expanding moderately by domestic and external demands in a well-balanced manner. real gdp has continued to grow for seven consecutive corners and average growth rates during that period is close to to present. at this moment, less 1% growth in the last seven quarters is substantial improvement. the unemployment rate has declined 2.7% which is even in the japanese context for
improvement. and 16 months, and japan's economy likely, the moderate expansion, is expected to be maintained on both the corporate household sector on the back of accommodative conditions. annual consumer pricing, approaching 1%. and excluding the effect of energy prices. strong economic recovery and week crises standout as much as
or more than in the us or europe. we think the output gap further improving labor market conditions steadily tightening from expenses affected to become bullish and medium to long-term expectations to rise. consumer price is likely to increase the targets and the mindset entrenched among people, therefore bank of japan will continue to support the economy and prices by pursuing monetary easing with persistence under monetary
easing and there are risks in the medium-term and my perspective they are mostly external and geopolitical risks. >> one question, one that is more generally discussed and an issue that mark carney doesn't and an economy with a growing significant trend for an extended period. you have unemployment at 2.7% which is clearly very low and falling and you announced when you became governor, governor and bank of japan together the inflation target of 2%, most people would say if the economy was like this, you would have got there. why is there no inflation? what do you think is going on
and how does that fit with what we are seeing in many other areas like euro zone and the united states as well? >> there are two factors with a response, when is sort of universal common factor like globalization, new technologies, all of them made inflation. and the factor that i just said in my initial remark, that is to say after a 15 year
years are slightly picking up. there are many factors to% inflation target so difficult and time-consuming, but we are finally close. >> promised the government you would deliver it. you don't have a problem of low inflation, you have the problem of managing monetary policy in the case of some strange decision the british people took in june 2016 which probably those who have ever read the will realize i wasn't wildly enthusiastic about. you have started a tiny increase in interest rates, a step toward normalization. how do you perceive monetary
policy challenges for you and other central banks in similar situations ahead in this environment of strong growth, generally contained information and where among the other things people are concerned about is normalization process might reveal more financial fragility? what is the path forward? >> in the next 15 minutes? >> to do it in two minutes let me generalize and talk about the normalization challenge and if i could pick up on what we just heard, the nature of the expansion, the recovery is stronger, getting up to 4%, broader, 90% of the economy growing faster, it also
healthier, in terms of the acceleration of g7 growth in the last year 80% plus of that has been investment picking up and trade picking up, this is not a consumer led recovery or acceleration and all of those have consequences for normalization so the first is the phillips curve coming back, that is the question, in the face of global secularization that i just mentioned and all of us have been discussing this. the crucial point as you get towards full employment as the gap shifts we call it that for a reason and you start to see the slopes. it should begin not only quite so historic degrees so we have to be cautious but if you look at wage behavior in the us, the
uk, maybe i shouldn't speak for other economies but you see that firming once you adjust for productivity growth and underemployment and up until very recently relatively low level of churn in the labor market it starts to affect together. that aspect which is pushing up the second element towards normalization of policy. the second element is the healthier bit, more investment as part of the recovery investment picking up relative to savings and we have seen a big shift in fiscal policy, about 21/2% drag from fiscal policy of 2010-2014 now adding depending on how you use multipliers but adding to growth, 1/2% or so on average
somewhere in that zone. that is a big swing. investment up, savings down, pushing an equilibrium rate of interest. the third element that i highlight is the stance of policy as a whole, if i could use the term for these purposes, the g4, members of the g7 who were practicing quantitative easing and if you look at the flow, fiscal issue minus the bonds being taken out of the market by asset purchases whether was the bank of england or the fed, we shifted from 2013 to 2017 basically no net flow or bonds being taken out on that, on the order of magnitude of $1 trillion of net issuance based
on announced plans going up to 1,000,000,000,005 or higher and expect to push up on rates. in the context of normalization, real economy providing support for it, technical factors which play into it, a very tough judgment to be made about the equilibrium rate of interest which has been very low and arguably should be raising a bit and a judgment about direction but probably not with any precision about degree, that is going to require one have a sense of direction as a whole for the central banks, regime shift towards normalization but a requirement for each of us to be prudent and patient as appropriate in making those judgments. last thing i will say and i won't expand on it, the uk is
in a relatively unique situation in that over the course of the next year as negotiations progress we will find a lot more about supply capacity of the economy in the near term, the right level of the exchange rate, whether there are other trade costs and how this affects demand and all those factors determine the appropriate monetary policy. >> let me ask one follow-up question. >> i was trying to run out the clock. >> back to that in a moment. you have had a central role in the financial stability board strengthening the global financial system. every time i write on this i get hundreds of comments along the lines of these crazy
central banks have already or will soon create the most unmanageable asset price bubble ever, the omni bubble. it will burst probably as of when you raise rates collectively and the crash will lead to total meltdown of this sort of thing. on a scale of one to 10, how likely is that? you can choose. 0 risk, go ahead and not worry at all and run away and get a bigger umbrella because the house is going to fall down. >> it is a composite. what is the probability of an adjustment in asset prices? that probability has gone up. if you look at corporate bonds spreads, high lows just before rtc just before the global financial crisis, rising rate
environment, the right stance of policy, expect some adjustment there, the big question, the market will find the right level for assets. the question is whether the core of the financial system will amplify those movements in an adverse way to feedback to the real economy. i would put that as quite low because it is not just the regulators but financial institutions represented here and across the world that transformed and giving a quick number, precrisis the coverage of short-term liability for banks in the uk plus their access to central banks is 10%. now it is 110%. they are fully covered with access to liquidity on all their short-term wholesale liabilities, that is a huge move. people can debate about it, we
had health debates but the overall level of capital standards of gone up ten times but actual levels of capital have gone up five times for the major banks, apples to apples in terms of capital, that is a huge shift and the type of shift in judgment of the bank of england and i will be around if the judgment is tested that would allow the system to withstand the shock of a disorderly brexit which is a big call in terms of orders of magnitude because we tested it. .. for the uk and i will stop with this, the major banks have 25% total loss absorbing capacity. even if they go through that capital, there's another layer
of securities security that ary institutional investors, some of whom are represented in this room, who would find out they are no longer debtholders but equity holders. so all of that provides real shock absorbing capacity. that is not to say that asset prices couldn't change but it's to provide a measure of confidence that if and when they do even if there are sharp changes, the system is a going to amplify that impact. >> this is incredibly important. so the conclusion i would draw, one is that all those commenters and possibly there are one or two in the audience who are worried the whole world will fall apart in the next couple of years because policy normalization, massive price collapses should come down and feel completely and utterly relaxed. and the second conclusion, which is completely personal, that it are any politicians in the world
who are telling us that the continually rising stock market is an indication of how successful they are, they might find the central banks will get in the way. [laughing] let me turn to you, carrie lam. tell us about how the world looks from your perspective, both in hong kong as is a core part of the asian economy, financial center, and if you can, about the rather large place with which you are closely connected? >> yes. as a small and externally oriented economy but at the same time one of the freest and most competitive economies in the world, hong kong certainly benefit from the global economic recovery. we are doing very well last year. we're projecting a full-year growth of 2017 as no less than
3.7% in new terms, , which is considerably higher than the 2% in the preceding year. that is, 2016. christine kept on reminding us that while the sun is out, i'm pleased to say that i've not discovered a leaking roof in hong kong yet. but similarly while the sun is out it's osgood to strengthen the foundation. strengthening the foundation will enable hong kong to seize the many opportunities available to us rising from china's economic policy, and also asia. because asia's growth now accounts for 60% of the gdp growth worldwide, and china about is 30% contribution. this is about global economic situation. i would not be doing justice if i just talked about the small economy of hong kong. if one looks at the china economic policy, which will be very relevant for hong kong,
because president xi jinping said in his report that he will support the central government will support hong kong being integrated in the national development strategy. last year president xi delivered to important speeches internationally. one of course is in this forum at last years davos. in january last year. but at the time i suspect that the global economic recovery was not very certain. so president xi was talking about leaders in various economies should show, shoulder responsibility to propel the economic growth globally. then last year which christine and i were also there at the apec meeting, at that point in time i think but he was very assured that there is now very bright signs of economic recovery. so president xi talked about that we should really seize the opportunity of the global economy in transition to
accelerate the growth of asia-pacific. so putting in that context, i try to summarize for not distinguished guest the economic policy of china, in my view, based on my reading of the two speeches, is how china will continue to uphold free trade and economic globalization, that we should add that to it and guide it and cushion its negative impact, and deliver its benefits to all. because if economic benefits are not shared by all, all the economy's will face one problem or the other. and it should be more reinvigorated, more inclusive, and more sustainable. so with that in mind since the world is now seeing some driving forces for growth, i feel we should take this opportunity to include governments to focus on more trade rules, to have more
regulatory collaboration between central bankers and regulatory authorities, to put in place some social policies to address issues that christine has reminded us also, income disparity and lack of opportunities, particularly for the young people. so i would just like to say that in this term of a dominant i will embrace those values and although we do not practice faith planning under the while we're still a free capitalist economy but we will embrace those values to put in place the necessary social policies to make timely investment in education, to enhance connectivity with the rest of the world, particularly with asean. last year we signed an fda and were negotiating free-trade agreements at this moment. so i remain very optimistic about the short to medium-term future of hong kong.
but as i said since we're so externally oriented please keep those tsunamis away from us and we will be safe. >> this is typical but it don't think we can avoid it, just ask one follow-up question and going to also discuss this with mary. president trump when he spoke here, i think the most substantive thing i think this audience and this panel is what he said about trade policy. andy said to quite interesting things, one of which was new, we'll come to that in a moment and one more traditional. he talked very explicitly, and it's not new, about countries, we didn't name names, which are perceived to misbehave on intellectual property. and countries that are pursuing industrial policies with the government subsidies. i think used that word. and it's truly no great secret that when he says of that he's
thinking about china. there are those of us who are very concerned at the risk of serious trade conflict, and we of course at the beginning of this week seemed relatively minor actions in this regard. from your perspective as running every open economy, great trading place, connected to china and, of course, to the u.s., how concerned are the people were you are that this actually might prove a very destructive development? how do you perceive that risk? >> of course as i mentioned being such an externally oriented economy and so depend on free trade, we would not like to see any trade conflicts or trade wars, so to speak. but trade deficit is that something that we are not used to. i remember at a session that i share with president trump at
aipac i gave them the figure. i said mr. mr. president, the largest trade surplus in america has is with this small economy called hong kong, at 31 billion u.s. dollars a year and you seem to be quite pleased with that. >> and you didn't threaten him with protection? >> he didn't mention that. coming back to china, as i mentioned, from president she's discussions in the two speeches, china is still a developing economy. so it will evolve and build in those things that will make trade more transparent, more fair to everybody but the fairness of speed to everybody. >> if i may turn to you, mary erdoes i very much and interested see whether there's anything in this overall picture of the world that is being presented by these very
distinguished representatives of official sectors you disagree with, and i will be particularly interested in your perspective from where you are on the impact of the tax reform, which is obviously a very big issue, and possibly on financial fragility as as a representative, very, very leading representative of the private financial sector. >> you know, i can't help but sit here and we're all in this audience, this is the last panel of the 2018 doubles event. and when we think about -- davos event. when we think about where we have come from and what we just heard from all the major economies around the world, i think we first and foremost have to thank mr. and mrs. schwab for bringing us together to be committed to improving the state of the world. because decision to bring together not just policymakers in one area and central bankers and another and ceos in another and philanthropists in another, but altogether to import and
export the best thinking so that, and especially after the great financial crisis, how do we get back on a road we don't have a boom and bust cycle? and who we said nine years later, we could be in our second recession host then had we had the regular ups and downs. and we have a global economy that is expanding almost universally. and it is because, you look at the people up here on stage and other central bankers and policymakers around the world, and you think to yourself how incredibly complicated this was to pull off. nine years, $11 trillion put back into the system, but not in an unthought through manner. so that we're sitting here and we have these people have worked tirelessly. it is so incredibly complicated to have gotten this right, and
what you've done for all of us, especially the investors in the world to be able to invest in that on behalf of all the pensioners around the world will benefit from that as a move towards their retirement, i cannot thank you enough for that, and i can't also not thank you note for giving all of these government jobs such a fabulous prestige and something that i know all of this now perhaps aspire to do even more so than in the past, and we thank you for that. [applause] >> fantastic. >> thank you. >> that's the nicest thing i've ever heard said about him so thank you all for coming. >> thank you. [laughing] >> about the old official sector should be extraordinary happy. i'm waiting for the but. >> there is no butt. [laughing] and, therefore, it is incumbent upon us as investors to watch what you're doing and to not miss a beat and not sit and think about the greatest worry
in davos that i've heard for the past several days is that there's not enough worry. people are worried that people are not worried. it's okay to not be worried if it's okay as madame luk arce said to some but we are, how we got her and did not miss a beat on investing so that people can benefit from that. so all the people around the world who can have access to public markets can be able to participate in the recovery of what is happening to continue to do so. and so the opportunities we can talk about them in the u.s. but they are really almost anywhere. u.s., europe, emerging economies being able to have participation in these companies, taking these policies and putting them back to work and reinvesting in their own communities and in their own products and services is exactly what our job is to do. >> do you want to say anything about the great tax cut at how it's going to impact the u.s. and the world? >> the great tax cuts for the
great tax normalization. the u.s. wishes out of whack. so the fact that we got it done was a very important move for the use competitive nature. how that goes back into play i think is the thing that is so exciting for the rest of the world because what happened in u.s. can often be contagious for other countries that exist in a multinational fashion or just intonation spirits of the fact that the ceos in the united states of america are not just doing one thing with those tax cuts but doing multiple things. they are taking that money and helping their shareholders. use more buybacks, more dividend payments. they are helping the customers of the companies producing much more in mandate to get better products and services, much more cap ex. very importantly there helping their employees. it's not just a one time bonuses we've heard about. it is wage increases, it is healthcare support, it is being able to help them and increase the retirement benefits.
this being able to have them to continue to participate that, and then additionally companies are also taking that money and putting it back into her his on philanthropic effort in the communities that they serve and the job retraining. so if you can continue to see that across america, that is what capitalism is all about. >> i'm going to move on now, and unless someone wants to add on the shorter-term risks, to the longer-term opportunity. i think the imf was the first to say we should fix our roofs while the sun shines. they've been rather good on metaphors, very things of this kind in the last few years, so i like that. it's no longer the new mediocre which is nice. so the big issue people have
focused on is the feeble state of productivity growth. some people seem to think tax cuts will be enough, and, but what is your view, is to regard, of the agenda of fixing the roof -- christine lagarde -- to make sure there's a cyclical recovery will be turned into an uptick in trend growth across the world? >> thank you, martin. a couple of things although i would like to point out to, one is a productivity numbers that we have are not satisfactory. productivity prior to the financial crisis was 1%. it's not down 2.2% in the advanced economies. that needs to be addressed. the second point is the potential growth needs to be improved as well. because while we are in this sweet spot at the moment it's not going to last forever and clearly many of the economy's
are growing nicely at the moment, are growing about the judge which internet self present risks. growth potential and reforms which will be country specific, i would like you do laundry list, each such as a roof of its own, need to focus on those two aspects. if i can focus on productivity for a second and that will touch on something which i mentioned earlier on as one of the downside risks which is lack of international cooperation. to address productivity, of the lagging productivity we have, we need to invest in research and development and facilitate innovation, no question about that. we need more trade rather than less trade. because trade encourages competition, fosters innovation and is conducive to that improved productivity. and that takes me back to my concern about lack of
international cooperation. to have more trade, better trade, fair trade, free trade, we need international cooperation. the concern i have someone is we tend to see a degree of common denominator, which is yes, we all need that but it needs a a reset. we need to look at state-owned enterprise subsidies. we need to look at sharing of intellectual property rights. we need to look at constraints imposed here and there. yes, and the imf agrees with all that. but it needs to be looked at in a cooperative way and through international cooperation. i think that should happen. i was particularly pleased to it that president trump mentioned wt bell. it's one the forum in which those things can and should happen, and hopefully through
improvement there come innovation that we've heard many of the leaders in the last two days focus on and identify as one of the areas where they want to invest we will improve that productivity. while mary, , i want to thank yu so much for making the efforts we have endeavored. i don't think we've completed the job. having growth is good. improving productivity is good, but making sure that the results of that growth are properly allocated, properly distributed, and that the growing inequalities that we see in advanced economies, many of them, stabilized but still very high in emerging market economies are a threat to sustainable growth. i mean, we've done multiple research on that. [applause] >> i can imagine why but we don't seem to have any real professional politicians on these panels, so they can't
respond. one tiny follow-up. i was interested when this came up yesterday already but president trump repeated it just now. he said, if i understand him correctly, that under the right terms the united states would consider negotiating to reenter the tpp as a multilateral endeavor. i think that's the first time i've heard this. you would have to regard that in terms of the trade agenda we've been hearing so much about as really rather remarkable and encouraging development, wouldn't we. >> was yes. i think, i think i agree with you. i'm not sure if it's multilateral in essence. it's sorry lateral rather. but you know, the best of the enemy is of the good. i think truly good indication. one more area if i may what international cooperation is also, everything favored by many countries including the united states actually, it's the fight
against corruption. we haven't talked much about and i don't want to spend too much time on it but it's one area which combined with the fight against tax evasion and probably shipping shooting and all the rest of it is actually vital to give more hope and encourage our economy. >> mark carney, i think you wanted to say something on this. >> you want to speak structural sock try to concentrate their but i'll start with a cyclical point which is we should be seeing a a pickup in productivy as you can appreciate tigta at the capital deepening. but another factor in the cyclical sense which leads to structural is that we've had up until recently quite low job, certainly the united kingdom. part of the diffusion process of new innovations and applications people moving, learning at one firm and moving to a new firm or setting up a new company. so we should get that particularly at a time of great innovation.
that's we get the productivity pickup. as you are well aware, we have a very long tail and most of our economies of quite substandard firms, and i think this one of the elements of it. it then goes to structural policies around, and i know its motherhood to say training but the elements that facilitate people to move, set up new firms. massport nonstructural which is around trade, i agree with your emphasis and emphasis of the gains, one of the things suggest could be more thought given is the nature of the trade deals, how they can immediately provide a dividend because it's the nature of the companies that benefit. people have put on over the recent years free trade for smes being an objective. actually we got the network effects and financing ability to change that. all of a sudden that is an element of globalization the works for all. brings productivity and instant diffusion but also trade and
services when you think but having a positive set of discussions around trade, the lag, liberalization of services where most of our populations work, trying to bring that up to the level of liberalization that has been accomplished on goods has that bigger impact or has the potential to have that bigger impact. >> does anyone else want to add something on the structural before we move on? >> thank you here in the japanese context, the most significant challenge faced by the economy is demographic change. working age population in japan a shrinking every year by half a million to a million. so since the economy is growing
by 2% or so, we are above the gross potential. most unemployment rates have declined the 2.7% but really significant labor shortage is developing an almost every sector of the economy. no manufacturing sector which was compared with the u.s. manufacturing sector, less efficient, is now investing heavily in high-tech laborsaving technology and investment. and also ai. because of the labor shortage,, not just business but also workers and trade unions, they
are in favor of those new technologies and laborsaving investment being made. and that is severely improving labor productivity significantly, particularly in the nonmanufacturing sector. in some sense this makes prices to respond rather slowly to the very strong economic growth. but in the long run this improvement, whatever, productivity and growth potential would make the economy
sustain relatively high growth in coming years with hopefully price stability target of 2% being achieved. >> can i turn quickly and then, because we'll have to have time for at least three questions. mark carney, if i can ask you, risk, we have discussed which is interested you a lot and others here, which is that the private sector, and i want to ask mary erdoes about this again very, very briefly, the internalization of which i think you called a tragedy of the horizon, mainly climate change. which most of the world still thinks is a big problem. how do you think we're getting at? is the private sector beginning to have some recognition that this has significant business
implications? >> short answer yes. and i think to make a tangible, but he's one example. the task force on climate financial disclosures, which is something that was set up at the request of the g20, g20 leaders. it was run by the private sector, chaired by mike bloomberg and the bottom line, president macron, i give you some numbers of the investor numbers that have signed up to this with an expectation that climate disclosure going to improve for those who invest in whom the land. the top 20 globally systemic and banks, eight of ten worlds largest asset managers, largest pension funds and the two major shareholder proxy firms all sign up, the rating agencies, et cetera. 80 trillion, $80 trillion of balance sheet with an expectation that working with
the users of capital we're going to get into a much better place in terms of the disclosure, not just of static risk but a strategy and governance of those risks and future import the operatives as well over time so that together, whether you're a skeptical true believer, believe in technology or a denier, we need a market in the transition to a lower carbon future. the private sector, they were passed the baton by the public sector and are delivering another question is implementation and improvement. >> anything you'd like to add very quickly? >> exactly what he said at the end is one of most important things for the private sector. it doesn't matter what you believe in climate change or not because when you can have the majority of this audience understand them believing in the issues, it's not universally so. and, therefore, the investors of the world have to forget how to do that. it's about the prevention of what happens when you have all these things that are happening
that must be addressed irrespective what you believe in. if you look at a city like amsterdam it infrastructure set to protect itself for a one in 10,000 year chance event. new york city, a one in 100 your account is we keep having this one in 500 your event and the united states of america. if you look at hurricane katrina, it cost the government $120 billion to six some things that had $10 million, 10 million, been spent by the army corps of engineers to figure out that there was ten feet of wall that should've been expanded and built underneath. we could've saved 120 billion. so you have to invest in infrastructure to protect yourself with things in the future. what we're going to see from the u.s. government is the next phase of big investments in infrastructure, asking for public-private partnership and i think that's the next exciting wave of what's to come.
>> thank you. that's very encouraging. and it's certainly true that the dutch do you really understand the danger of water. [laughing] i'm going to take three questions. they must be one sentence. very bad on timing. say who you are and you can address it to one person. i probably will not be able to give them to more than one person, an opportunity to answer. somebody right there, yes, please stand up, say who you ar are. >> minister of finance of guatemala. just a question, fortitude is been going down over the last ten years. isn't there an element that the speed of productivity has slowed in the social license fee for infrastructure products, much more complicated. it's not just innovation. it's not just productivity. but social productivity of the capacity to agree on doing things which has lowered the capacity and productivity.
>> you said slowing and urbanization, is that what you said? >> yes, in developing economies, and the process. >> anybody else want to ask a question ask is there a woman here somewhere that i can't see? yes. i think there should be gender inequality. >> good afternoon. the world has changed. do you think that the target of 2% for inflation is still realistic? >> very good. 2% inflation target. okay. and i apologize to all those i will not manage. >> knowing what we know now about the lessons from the financial crisis, are there any fundamental changes that you would like to see made in the macroeconomic policy framework? are there any major things we still need to do to improve it? >> this has the great advantage
of being the envelope for the second question. so we don't have much time, some extra with you, christine lagarde? the suggestion was made that productivity growth is slowing in part because of what some of fundamental drivers, particularly urbanizing slowing. that's very important. we shouldn't be surprised productivity growth is slowing in emerging and developing countries. on the other hand, there still a huge backlog of productivity enhancing investments the clerk can make because many of them still are relatively poor. how does the imf see the balance here? >> of it like you did. >> oh, dear. >> i think the urbanization, when it goes through projects, n a lifetime from the beginning of the project, financing, the implication is so, so forth, that is clearly a slowing down factory. this is not just it. there's also population aging, maybe not so much in some of the
emerging market economies. there's also delayed investment over the course of the last few years which is not helped. there are multiple factors that are affecting it, but increased urbanization is one of them. can i i just say one word on -- >> of course. >> that's an interesting one. inflation was not decided randomly. i think it was very carefully calculated on the basis of multiple factors. there are areas in the world where sorely from our perspective we considered to arrive at an average 2% inflation target, or thereabouts, in a particular currency zone it might be appropriate for some of the countries in that zone for higher inflation than the 2%. >> i'm going to ask the question about the inflation target of you, governor, said she finally agreed as you finally said,
almost two decades of inflation, and now it seems to be suggested by some that 2% is too low, really it should be 4% say you got plenty of room to maneuver. what is your view where you are now? are you trying to hit a very hard target that is already outdated? >> i think 2% inflation target is still meaningful, relevant, and useful for managing manufacturing policy. a few points. as you may know consumer price index or whatever price indices tend to overestimate real price development. if you're inflation indicator shows 1% inflation but in the
early days there may be 0% inflation, so you must aim at achieving some positive inflation target rather than zero inflation. second point is that continues to be some cyclical movement, and when you need to implement accommodative expansionary monetary policy, you have to have sort of policy room to do so. in order to do so, i think you have to keep reasonable inflation targets and reach your policy, some positive level, and you can substantially reduce in
case of need and so on. so policy room, monetary policy room is necessary. third, after many years of trial and experimentation, and almost all central banks in the developed world have adopted 2% inflation target. and i think this is the common a sort of global standard, in which medium and long-term exchange-rate relationship between major currencies tend to be stable. so all in all i think 2% inflation target has been well-established, although some economists are arguing for higher inflation targets or price stability targets or
nominal gdp target, , so on ando forth. there may be good reason to consider, , but at this moment i think after ten, 20 years of experience among major central banks, this 2% or so inflation target should ever be maintained for price stability in for economic growth. >> mark carney, 30 seconds. >> very quickly to the last question. ben bernanke he's id on temporary price targeting in very clear circumstances and making it clear, ex ante that is a possibility is an interesting idea. we look at it in the uk in the throes pick a targeted because of the quality of the data. it's tough to do in the middle of that circumstance.
obviously what they propose is different than that so it merit some consideration in quiet seminars, and good times. it's an example of fixing the roof while the sun shines. >> the only point i would make if i may is i don't think the monetary policy in the macro policy tool was amiss soundless element and i been saying this now for ten years. and the sound of element was fiscal policy and we would have to go, it was used very effectively very early, and it was withdrawn, the stimulus was withdrawn much too soon and that created some very big problems. now, i have minus ten seconds i'm going to summarize our wonderful discussion in the following five unbelievably quick points. one, we have a wonderfully strong recovery which is certainly cyclical, and we want to make structural. second, there is a consensus on
this panel of those who are not responsible for all this that the official sector has done a wonderful job in getting us here. and since this is a time to be generous i'm going to go along with that fully but, of course, in all of the days when i write my columns i am definitely not bound by that recognition. but i think it is fair. it could've been very much, very much worse and the interwar time, it was. three, this provides us with a series opportunity to improve policy on a whole range of dimensions. christine lagarde has emphasized some of the most important, which include the distribution of the benefits of growth. fourth, the only thing to fear is the absence of fear itself. while there are many other things to fear, but the absence of fear always terrifies me,
particularly when it's in the markets. we had been told a very confidently by someone i always believe, maybe the governor of my own central bank, that the financial sector itself is pretty strong. and finally, if we are thinking about fear you the financial sector and the possible meltdown of asset prices, whatever that might do, there are plenty of significant domestic political, global geopolitical and global economic challenges such as trade policy and beyond that, we discuss climate, so if anyone leaves this hall feeling the complete abstinence of fear, that i suspect they are in the wrong job and in the wrong place. [laughing] with that, i think the panel for a wonderful discussion.
[applause] >> this morning we are live in atlanta, georgia, for the next stop on the c-span bus 50 capitals tour. georgia lieutenant governor will be our guest on the bus during "washington journal" starting at 9:30 a.m. eastern. >> today on capitol hill scott pruitt the epa administrator testifies at a senate environmental public works committee oversight hearing. live coverage antennae and eastern on c-span3 pic you can watch live on c-span.org and the free c-span radio app. >> the president of united states. [applause] >> the night president donald trump gives his first state of the new address to congress and the nation. join us on c-span for a preview of the evening starting at 8 p.m. eastern. then the state of the union speech live at 9 p.m. following the speech the democratic response from congressman joe kennedy.
we will hear your reaction and comments from members of congress. president trump's state of the union address tonight live on c-span. listen live on the free c-span radio app and available live or on-demand on your desktop, phone or tablet at c-span.org. >> next on c-span2, navy secretary richard spencer is joined by technology a financial industry leaders to talk about the fence innovation. from the reagan library in simi valley, california, this is about an hour and 15 minutes. [applause]